Keith Macky Auckland University of Technology, Auckland, New Zealand

Transcription

1 Asia Pacific Journal of Human Resources (3) 261 High-performance work systems and organisational performance: Bridging theory and practice Peter Boxall University of Auckland, Auckland, New Zealand Keith Macky Auckland University of Technology, Auckland, New Zealand This commentary paper explores the meaning and significance of highperformance work systems (HPWSs), an important topic in the debate around how to build a high-skill or high-road economy. Work reforms to increase the involvement of production or front-line service workers are at the heart of these systems, which are therefore more aptly called high-involvement work systems (HIWSs). While emphasising that the specific practices in such systems need to be customised to industry and occupational conditions, this paper outlines the core features of HIWSs, including the wider managerial and governance processes in which they are embedded. The paper goes on to explain how the literature in the HPWS area is making a valuable contribution to our understanding of the role of intervening management and employee variables in the performance of any kind of HR system. This underlines the value to any company concerned about its HR performance of looking at the chain of links that runs from management intentions through management practices and employee responses to organisational outcomes. Keywords: high-performance work systems, high-involvement work systems High-performance work systems (HPWSs), a type of HR system, are an important concept in contemporary research on workplaces. In an era of economic globalisation, they are a major issue in the policy debate around how Correspondence to: Professor Peter Boxall, Department of Management & Employment Relations, University of Auckland, Private Bag 92019, Auckland, New Zealand; p.boxall@auckland.ac.nz Asia Pacific Journal of Human Resources. Published by SAGE Publications (Los Angeles, London, New Delhi and Singapore; on behalf of the Australian Human Resources Institute. Copyright 2007 Australian Human Resources Institute. Volume 45(3): [ ] DOI: /

2 262 Asia Pacific Journal of Human Resources (3) to build a high-skill or high-road economy and avoid engaging in a race to the bottom. HR systems or models are clusters of work and employment practices oriented to a particular group of employees. Large organisations typically have one kind of HR system for managers and another for their main group of production or operations workers. Where professionals, technical specialists and administrative support staff are employed, it is commonplace to have distinctive HR models for these groups as well. While there will be some overlaps among these systems, the differences among them are important, making a significant impact on the type of people recruited and how they contribute to company performance. The notion of HPWSs arises out of concern with the way in which production workers have been managed in large parts of western manufacturing. There are various definitions but a common thread is that HPWSs are systems of managerial practices that increase the empowerment of employees and enhance the skills and incentives that enable and motivate them to take advantage of this greater empowerment (Appelbaum et al. 2000; Gollan 2005; Lawler 2005). While the key focus has been on the way production workers are managed in manufacturing, the topic of HPWSs is actually part of a larger agenda concerned with how HRM can be used to improve performance in all kinds of organisations with various kinds of workers. In this article, we highlight two sets of issues that have gained prominence under the rubric of HPWSs. The first issue is concerned with those situations where a company s HR systems for its production workforce do not fit with its current competitive context. In these situations, firms need to make some kind of serious change. They can either outsource their production to sites which perform much better in cost-effectiveness or revitalise their historical production sites through better HR systems and new technology. The HPWS literature is mainly concerned with studying western firms that decide to revitalise their historical HR systems by examining why they change and what HR policies and practices underpin the change. The second set of issues is to do with how the links between these new HR systems and organisational performance can be improved. Research on HPWSs highlights the importance of the mediating links or intervening variables between HR systems and organisational outcomes, including critical variables to do with employee beliefs, attitudes and behaviours. The lessons from this line of HPWS research have much wider applicability: they are telling us important things about how any HR system needs to work. HPWSs: the why and what questions Going back to the landmark Hawthorne studies of the 1930s, there is a long tradition of interest in how to make production jobs more motivating and

3 HPWSs and organisational performance 263 enhance employee commitment. Serious management concern with HPWSs, however, really stems from the rise of Japanese high-quality production systems in the 1970s and 1980s, including such techniques as quality circles, just-in-time inventory and delivery, and flexible, team-based production (Bartram 2005; Boxall and Purcell 2003). Faced with competitors who were simultaneously raising product quality, reducing production costs and improving rates of innovation, some elements of western manufacturing (like the British motorcycle industry) 1 simply disappeared while others soon learnt they could not rely solely on their marketing skills. To survive, they had to fundamentally change their production systems and grow their reputation for quality and value. A long overdue focus on the internal operations of companies began to take hold. In the automobile manufacturing industry, struggling western firms made major efforts to reform their production systems by adopting Japanese lean production principles (Womack, Jones and Roos 1990). This meant moving away from the low-discretion, control-focused work systems associated with Fordist operations management towards work systems which increased the involvement of production workers and raised their skills and incentives (MacDuffie 1995). Some commentators, like Appelbaum and Batt (1994) who published an influential book on the subject, began to call these new work systems highperformance work systems while others, following Lawler (1986), talked of high-involvement work systems (HIWSs). Yet others talked about highcommitment management (e.g. Walton 1985; Wood and Albanese 1995). We should pause for a moment to sort out this terminology. In our view, Lawler s involvement terminology is the most helpful because it makes it clear what it is that is changing in HR systems for production workers: we are talking about a major shift in the degree to which production operators are involved in, or empowered to make, decisions that affect their work quality and output. This then leads on to changes in practices that enhance their skills (such as more selective recruitment and better training) and their commitment (such as team- and company-based compensation). Collectively, these changes in HRM are designed to enhance employee and operating performance. We should note, however, that this concern with the quality of production-line work is not something that applies right across western manufacturing. In semi-conductor manufacturing, for example, an industry which has emerged since World War II, production work has historically been dominated by highly skilled professional engineers (Appelyard and Brown 2001). Unlike assembly-line production workers, these workers do not need job enrichment because they have always enjoyed high levels of involvement. The interest in HIWSs really forms part of a major change in production 1 For an excellent analysis of the rise and decline of the British motorcycle industry, see Ian Chadwick s website:

4 264 Asia Pacific Journal of Human Resources (3) systems in those parts of western manufacturing, such as steel making and car manufacture, where the deskilling of production work and demarcation among trades took a strong hold as mass production developed in the early twentieth century. In these manufacturing contexts, the need to adopt Japanese-style lean manufacturing principles has led to change in work systems towards a highinvolvement model. High-involvement work practices typically include greater decision-making autonomy on the job, as well as off line in quality circles or other types of problem-solving groups. Managers, however, need to keep in mind the importance of customising work practices to their specific industry and occupational conditions. For example, in situations where workers have high task interdependence, there is often a shift to teamwork, but teams can be counterproductive in conditions of low interdependence (Park, Gardner and Wright 2004; Sprigg, Jackson and Parker 2000). Along with the Japanese quality challenge, a key environmental stimulant of change in HR systems in manufacturing over the last 20 years has been the advent of advanced manufacturing technology (AMT). This includes such technologies as robotics, computer-aided design (CAD), computer numerical control (CNC) machine tools, and electronic data interchange (EDI) systems. Research on AMT, including work conducted among Australian and New Zealand manufacturers (Challis, Samson and Lawson 2005), shows that such technologies reach more of their potential when production workers jobs are redesigned and their skills improved to enable them to enhance the operating performance of these technologies. Studies by Wall et al. (1990) and Wall, Jackson and Davids (1992), for example, show how work redesign and training that enables production operators to solve technical problems as they occur reduces the need to call in specialist technicians for problem-solving and thereby enhances productivity. The productivity benefits come from quicker response to these problems and thus lower machine downtime. In the longer run, productivity improvements also come from more effective use of the capacity of operators for learning: employees who enjoy greater empowerment learn more about the reasons why faults occur in the first place and find ways to reduce their incidence. The converse of this argument is that investments in HIWSs are unlikely to be economic in low-tech, labour-intensive manufacturing which makes little use of AMT. Much of the apparel and toy manufacturing being conducted in China, for example, works very cost effectively on classical management principles of labour specialisation without much worker empowerment (Cooke 2004). Firms in labour-intensive manufacturing are increasingly moving their plants offshore to lower cost countries. A case in point is one of Britain s most innovative manufacturing firms, Dyson. The firm, an international leader in vacuum cleaner technology, shifted its production facilities to Malaysia in the year Relocation to Malaysia not only delivered lower unit costs than was possible in the UK, but also ensured proximity to key parts suppliers, thus

5 HPWSs and organisational performance 265 improving the firm s location in its supply chain. HR strategy in Dyson now revolves around managing a dual workforce: one in the UK where research and development (R&D) staff are employed, and one in Malaysia where the products are assembled. 2 Bearing in mind, then, that the specific practices used to bring about higher employee involvement need to be intelligently adapted across industries and work processes, the core features of HIWSs are outlined in table 1. The table helps to make the point that HIWSs are embedded in an organisational context. There are features of the broader management process and the leadership or governance of the organisation that need to be supportive if HIWSs are to be successfully implemented (Gollan 2005). While interest in HIWSs sprang from manufacturing, it is not simply a manufacturing issue. There are also studies of the service sector which point to the value of ensuring that HR systems fit appropriately with the nature of the industry or the competitive segment within the industry. High-skill, highinvolvement systems of managing people are naturally necessary in professional services because workers capable of providing professional services need Table 1 HIWSs: key direct and indirect drivers of workplace performance HIWSs: direct drivers of workplace performance HIWSs: indirect drivers of workplace performance 1. Technology Greater adoption of new technology in those industries or work processes where it is a significant performance enabler, including better IT 2. Work reorganisation More empowering styles of working in those jobs where job enrichment or greater worker involvement in problem solving and decision-making will make better use of human potential and thus improve work quality or customer satisfaction 3. Employee selection and skill Careful selection of employees for job-match and for learning potential plus enhanced skill development to take advantage of new technology and/or work in a more empowered way 4. Performance and commitment incentives Enhanced incentives to work smarter and to reduce employee turnover (e.g. financial incentives, stronger vocational or career development, familyfriendly employment practices) 5. Management planning and measurement Improved systems to plan and measure workplace performance, including data gathering on employee attitudes, and ensuring the accounting system properly recognises the investments in human resources that drive performance improvements 6. Management capability and support Improved investments in management development at all levels and in support for the enabling role of front-line managers 7. More cooperative labour relations A more consultative partnership style of labour relations with unions and/or with employee representatives chosen by the workforce 2 For a summary of the company s history, see

6 266 Asia Pacific Journal of Human Resources (3) to be paid well and developed continuously, but they are also becoming important in those service industries which are able to segment customer needs. In the hotel industry, for example, luxury hotel operators can improve revenue and customer retention through HR systems that empower front-line employees to personalise service (Haynes and Fryer 2000). They therefore have an interest in investing in the employee development and management practices that will support a high-quality competitive strategy in this industry. Such investments in employees, however, are unlikely to be economic at the low-price end of the hotel industry where customers want a cheap bed without frills. In general, HIWSs are unlikely in mass services where customers are price conscious and willing to engage in self-service to help keep prices low (Boxall 2003). It is important to bear in mind a critical difference between manufacturing and services: while modern high-tech manufacturing often has the capability to deliver better quality and lower prices, while also investing heavily in employee development and retention, improvements in quality in service industries generally translate into a price premium. If customers are resistant to price increases for basic services, the options for HR strategy are more constrained. In summary, then, the first stream of literature in the HPWS area is concerned with identifying the market or technological situations in which firms have a clear interest in changing towards HR systems which increase the empowerment, skills and rewards of production or service workers. Recognising the need to be careful with specific practices, research is increasingly outlining the broad shape of the changes that are needed in such a highinvolvement HR model. HPWSs: the how question To provide more practical guidance, however, research needs to explain more fully how such systems work. This involves studying the difficulties and complexities that can arise in what researchers have called the organisational black box (e.g. Purcell et al. 2003; Wright and Gardner 2004). The general principles being developed in this stream of work are not relevant only to HPWSs but can be applied to any situation in which there is a need for a company s HR systems to perform more effectively. This focus here is on the mediating links from management s intentions through to whatever notion of organisational performance is desired (figure 1). The process of HRM is actually a chain of links in which 1) intended HR practices lead to 2) actual HR practices, which lead to 3) perceived HR practices, and then to 4) employee reactions, and, finally, to 5) organisational performance. Figure 1 underlines two important facts about the links between HRM and performance. First, it emphasises that there is often a difference between what management says the company will do and what managers actually do

7 HPWSs and organisational performance 267 Figure 1 The HRM-performance causal chain Intended HR practices Actual HR practices Perceived HR practices Employee reactions Organisational performance Source: adapted from Wright and Gardner (2004); Purcell and Hutchinson (2007) with their staff. Line managers, including supervisors and team leaders, are responsible for converting much of management s intentions for HRM into actual HR practice, given the resources they have to work with, and their judgments about what will work and what serves their interests. It is useful therefore to think of HR practice as a wide range of actual managerial behaviour centred around a notional standard. The second vital fact that figure 1 illustrates is that if management wants to bring about valued organisational outcomes, it needs to influence employee beliefs, attitudes and behaviour. Employee behaviour is critical to whether the desired organisational outcomes will be achieved, and is influenced by employee perceptions of, and their cognitive and affective responses to, HR practices. Major gaps between management intentions and perceived management actions usually undermine employee trust and loyalty and thus affect performance outcomes. The possibility for gaps between rhetoric and reality (Legge 2005) underlines not only the need for senior managers in large organisations to figure carefully what they want to achieve and then follow through on their pledges achieving greater consistency in their own behaviour but also the importance of the management of lower level managers. While this includes both staff specialists, such as HR specialists, and line managers, the latter are particularly important if consistency is going to be high in HRM. Line managers are not simple conduits. Line managers action or inaction is often responsible for the difference between espoused HR policies and their enactment. Some formal HR policies (such as rates of pay and the details of pensions) are (nearly always) directly transmitted from policy to practice without slippage, but much else is filtered through line managers, positively or negatively. The quality of the relationships between line managers and their team members is starting to receive greater attention in the analysis of HR systems. There is no doubt that ties within a work team can be much stronger than those with remote senior executives because it is much easier to trust someone you know, especially if you find them to be a person of competence and integrity (Macky and Boxall 2007). A recent study by Purcell and Hutchinson (2007) of the British retail organisation, Selfridges, underlines the value of senior management taking a much greater interest in the selection, development, support and motivation of front-line managers so that they, in turn,

8 268 Asia Pacific Journal of Human Resources (3) manage front-line employees in ways that enhance employee satisfaction and commitment. The impact of HIWSs on employee outcomes has thus become central to the academic debate in this area. The issue of whether companies gain from HIWSs turns on the way the HR changes affect employee attitudes and behaviour (Kochan 2004). Here the academic literature is split. On the one hand, there are qualitative case studies that point to the dangers of work intensification, often when workers are confronted with greater responsibilities in lean, downsized organisations (see Delbridge (2007) for a review of this evidence). On the other hand, survey evidence indicates that HIWSs which bring improvements in employee autonomy, greater development and use of their skills, and greater financial rewards appeal strongly to workers, significantly lifting job satisfaction (Berg 1999; Vandenberg, Richardson, and Eastman 1999). A logical conclusion would be that workers respond most positively when increases in their responsibilities do not come with an increase in stress and strain (Macky and Boxall 2006; Mackie, Holahan and Gottlieb 2001). In summary, then, the HPWS literature is bringing a sharper focus on the intervening or mediating variables that lie between management intentions and organisational outcomes in HRM. While there are key issues that relate specifically to worker responses to HIWSs, there are also important lessons for any organisation wanting to improve the process of HRM. Conclusions The burgeoning HPWS literature is playing two valuable roles in terms of the development of contemporary HRM. First, it is helping us to identify the market and/or technological situations in which a company s HR systems for operating or front-line service workers would benefit from moving to a highinvolvement model. The broad outlines of this HR model are becoming clearer and have been summarised in this article (table 1). Companies that see value in this model, however, need to customise practices to their specific situation. Second, aside from the contours of this particular kind of HR system, the literature in the HPWS area is making a valuable contribution in highlighting the role of intervening management and employee variables in any kind of HR system (figure 1). Thus, the literature reinforces the value to any company concerned about its performance of looking internally at the chain of links that runs from management intentions through management practices and employee responses to organisational outcomes. The clear implication is that data-gathering through such practices as regular employee attitude surveys and focus groups is important when management wants to improve organisational performance through HRM. Better information on employee perceptions of, and responses to, espoused and actual HR practices is a prerequisite to improving HRM s contribution to organisational effectiveness.

9 HPWSs and organisational performance 269 Peter Boxall (PhD) is professor of human resource management in the Department of Management and Employment Relations at the University of Auckland. He is co-author with John Purcell of Strategy and human resource management, co-editor (with John Purcell and Patrick Wright) of the Oxford handbook of human resource management, and co-editor (with Richard Freeman and Peter Haynes) of What workers say: Employee voice in the Anglo-American workplace. Keith Macky (PhD) is associate professor of human resource management in the Department of Management at the Auckland University of Technology. He has more than 20 years HR experience in both academic and consulting environments, including senior positions at Massey University, Ernst & Young, and KPMG. He is the co-author with Gene Johnson of Managing human resources in New Zealand. References Appelbaum, E., T. Bailey, P. Berg, and A. Kalleberg Manufacturing advantage: Why high-performance work systems pay off. Ithaca: ILR Press. Appelbaum, E., and R. Batt The new American workplace. Ithaca, New York: ILR Press. Appelyard, M., and C. Brown Employment practices and semiconductor manufacturing performance. Industrial Relations 40(3): Bartram, T Small firms, big ideas: The adoption of human resource management in Australian small firms. Asia Pacific Journal of Human Resources 43(1): Berg, P The effects of high performance work practices on job satisfaction in the United States steel industry. Relations Industrielles 54(1): Boxall, P HR Strategy and competitive advantage in the service sector. Human Resource Management Journal 13(3): Boxall, P., and J. Purcell Strategy and human resource management. Basingstoke: Palgrave Macmillan. Challis, D., D. Samson, and B. Lawson Impact of technological, organizational and human resource investments on employee and manufacturing performance: Australian and New Zealand evidence. International Journal of Production Research 43(1): Cooke, F.L Foreign firms in China: Modelling HRM in a toy manufacturing corporation. Human Resource Management Journal 14(3): Delbridge, R HRM and contemporary manufacturing. In The Oxford handbook of human resource management, eds P. Boxall, J. Purcell, and P. Wright, Oxford: Oxford University Press. Gollan, P High involvement management and human resource sustainability: The challenges and opportunities. Asia Pacific Journal of Human Resources 43(1): Haynes, P., and G. Fryer Human resources, service quality and performance: a case study. International Journal of Contemporary Hospitality Management 12(4): Kochan, T Restoring trust in the human resource management profession. Asia Pacific Journal of Human Resources 42(2): Lawler, E High-involvement management. San Francisco: Jossey-Bass. Lawler, E Creating high performance organisations. Asia Pacific Journal of Human Resources 43(1): Legge, K Human resource management: Rhetorics and realities. Basingstoke: Palgrave Macmillan.

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